Embalming for Dollars

Embalming is not required by law. But it can be a very profitable part of the funeral business.Embalming practices and disclosure are at the center of the ongoing controversy between state regulators and funeral giant Service Corporation International (SCI). Those same issues are the focus of a lawsuit filed June 24 in Wichita Falls by the family of Jefferson Frank Hood III. Although Hood's family contracted with Hampton-Vaughan Funeral Home in Wichita Falls for funeral services, the funeral home, which is owned by SCI, shipped Hood's body to Dallas for embalming. According to John Horany, the Dallas attorney representing Hood's family, the family was not told that Hood would be embalmed in Dallas. Adding further intrigue to the lawsuit is the fact that Hood was embalmed at Sparkman-Crane Funeral Home, the same funeral home that was the focus of the Texas Funeral Services Commission's (TFSC) original investigation into SCI.

The lawsuit, filed by Hood's parents, accuses SCI of deceptive trade practices, negligence, fraud, and intentional infliction of emotional distress. The suit asks for punitive damages but does not specify the amount of money being sought.

Hood's parents allege that "embalming procedures were not properly performed" and that when Hood's body was shown to family members, "there was purging of fluids from his body." The suit adds that after Hood's body was placed in a mausoleum last July, there were "problems with odors, gnats and fluid seepage."

In April, Hood's mother was quoted by the Austin American-Statesman as saying that when she looked at her son's body, the embalming looked "like a rookie did it." Last month, after investigating the work done in the Hood case, the TFSC recommended that the funeral director at Hampton-Vaughan, the funeral home where Hood's parents bought the services from SCI, be fined $1,000 for the incident. The agency also recommended that the funeral home itself be fined $1,000.

The TFSC became concerned about embalming practices at Sparkman-Crane after they found records which appeared to indicate that apprentice embalmers were doing embalmings at the site without proper supervision. On May 7, just two months before Hood was embalmed at Sparkman-Crane, May wrote to the TFSC commissioners about problems she was having in getting proper documents from the SCI-owned funeral home. May told the commissioners that the documents the agency got from the funeral home "differed from information in other records filed with this agency, thereby calling into question the credibility and reliability of the documents produced." May explained that "the most effective and efficient means of acquiring the information was via subpoena duces tecum." So, on March 31, 1998, the agency sent SCI 23 subpoenas, seeking 15 months' worth of funeral-related documents. According to May's report, the TFSC got a letter from an SCI lawyer on April 6, saying that "the SCI affiliates would not respond to the subpoenas."

On April 10, TFSC personnel showed up, unannounced, at Sparkman-Crane and at the Lucas Funeral Home in Hurst and demanded to see the documents they had requested in the subpoenas. The unannounced visit infuriated SCI's CEO, Robert Waltrip. Five days later, he fired off a six-page letter to McNeil, questioning the agency's right to issue subpoenas, which he called "outrageous, unwarranted, and unexplained." He went on to say that the agency's "'storm trooper' tactics have no place in responsible government," and that the agency had engaged in an "abusive and pointless display of power."

But the issues brought up in the Hood case and in the TFSC investigation are only part of the story. Hood's family and the TFSC focus on competence and licensing. Perhaps a bigger issue is money. SCI is known for charging high prices while working to cut its costs. And its embalming practices are an example of that effort. For two and a half years, between August of 1995 and December of 1997, Doyle Ooten, the owner of Professional Morticians of Fort Worth, did contract embalming for SCI. According to Ooten, who now runs a funeral home in Fort Worth, he charged SCI $145 per body for transporting and embalming each body. All of the work was done at Ooten's commercially licensed embalming facility. Yet Ooten says that SCI then was "charging customers as much as $950" for the services that he delivered. Ooten says that he handled about 600 bodies per month for SCI in the Dallas-Fort Worth region. Given that kind of volume, SCI was making hundreds of thousands of dollars per month in profit on embalmings in the Metroplex alone.

Mum on Procedure

Despite the huge profits, SCI does not tell its customers that it is using embalmers like Ooten. Nor does it tell clients how much it is paying Ooten or other contract embalmers. The company says it is not required to do so, but the TFSC disagrees. Federal Trade Commission rules require funeral homes to tell consumers if they are using third parties for some goods and services. The FTC calls them "cash advance items" and requires funeral homes to tell consumers how much each cash advance item costs and how much the funeral home is charging them for that good or service. The FTC rules define cash advance items as any "item of service or merchandise" that is "obtained from a third party and paid for by the funeral provider on the purchaser's behalf." SCI insists that the FTC rules regarding cash advances do not apply to third-party contracts for embalming services. Says SCI spokesman Bill Miller: "We don't tell our clients" when contract embalmers are used. "We are not required to under law. And it is not a cash advance item."

However, a number of sources with experience in the funeral industry disagree with SCI's interpretation. Marc Allen Connelly, the former general counsel for the TFSC, says if the work is "not being performed at their facility, it's a third party. And that's an item that ought to be disclosed to the consumer. The real issue is, they have to tell the consumer how much they are paying for the service. They can charge whatever they want as long as the consumer knows there's a third party involved and how much the funeral home is charging them."

Myra Howard, an FTC attorney who oversees the agency's funeral regulations, says that disclosing the use of third-party embalmers has not been an issue in the past because it was unclear if consumers were hurt by the lack of disclosure. She adds that when the funeral rules were written, almost all funeral homes were owned by individual owners who did the embalmings themselves. But with the advent of SCI and other consolidators, the funeral business has changed and commercial embalming services have become more common.

Asked how third-party embalming should be classified for consumers, Howard replied, "If you take a strict reading of our rules, it could be considered a cash advance item." Howard said the agency is currently reviewing its funeral regulations and that if third-party embalming is "becoming more prevalent and it turns out that consumers are being harmed by the practice, it could be we will take a serious look at it."

SCI is already making big profits on embalming. In five of its Austin-area funeral homes (the Cook-Walden chain), SCI charges $725 for embalming, which is up to triple the price charged by other local funeral homes. Given SCI's high volume and a business model which seeks to cut costs, the company's actual cost for embalming a body may be as little as the $145 that it was charged by Ooten's company.

In its dispute with the TFSC, SCI wants the agency to interpret the law so that independent, commercial embalming companies will be able to operate out of its existing funeral homes. SCI also wants the state to rule that these commercial embalming companies be allowed to operate under the licenses already held by SCI's funeral homes. If the state agrees, SCI will be able to reduce its overhead and thereby reduce its embalming costs even further.

In a July 23, 1998, letter to the attorney general's office, the TFSC's former general counsel, Jeffrey Schrader, explained the agency's position on the embalming issue. It's a position that clearly favors the consumer, not SCI. Schrader said that Texas law requires commercial embalming companies to have their own commercial embalming license. His letter also states that under Texas law, "a commercial embalming establishment cannot be licensed to operate out of the embalming preparation room of a licensed funeral establishment."

To bolster that conclusion, Schrader says that if commercial embalming facilities are allowed to operate out of existing funeral homes and share the same embalming preparation room, then "it would be unclear to the agency, consumers,\ and the general public as to who is ultimately accountable or responsible for the activities occurring in the funeral home facility."

Despite the TFSC's position, some funeral home owners are siding with SCI. John Amey, the co-founder and former owner of Amey Funeral Home in Austin, who was also the chairman of the TFSC during the 1980s, believes funeral homes do not have to tell their clients when they are using a third-party contractor for embalming. And he even submitted an affidavit to that effect in the brief that SCI submitted to Attorney General John Cornyn.

But make no mistake, Amey appears to have an intense dislike for SCI. He says their prices for embalming are "preposterous" and "outrageous." However, he doesn't expect anything to come of the current investigation into their practices. "They are the biggest. They are the bully. They have the highest prices. They are the intimidators. They do it all," he said. The outcome of the TFSC's dispute with SCI is yet to be decided. But the case brought against SCI by Hood's family for the faulty embalming is going forward. And given the subject matter, it will no doubt prove embarrassing for the world's largest funeral company.

Industry Under Review

The Federal Trade Commission is currently reviewing the regulations that govern the funeral industry. It is encouraging citizens to comment on the existing funeral rules and to specify which regulations should be changed. Mail comments to: Federal Trade Commission, 600 Pennsylvania Ave., NW, Washington, D.C. 20580. Please mark your comments with the notation: 16CFR part 453. You can also e-mail comments to: funeral@ftc.gov.